When Is an Employee's Home Office an Employer's Home Office
The modern workforce is everywhere, even in your employees’ homes. Sometimes those homes are in different states from your headquarters. But what happens when an employer’s only operations in a state is an employee who is working out of his den? Can an employer be sued in a state where it has no office other than an employee’s in-home office?
In two recent decisions by federal judges, one in Illinois and the other
in Texas, the judges found that employers with only employees working from home
in a state are not subject to patent infringement suits in such states. In Billingnetwork Patent, Inc., v. Modernizing
Medicine, Inc., the court dismissed plaintiff’s patent-infringement suit in
November of this year, holding that defendant did not have a “regular and
established place of business” within the meaning of 28 U.S.C. § 1400(b) when defendant’s
only operations in Illinois were in the homes of five employees. In Uniloc USA v. Nutanix, decided in
December in Texas, the judge also found the 19 Nutanix employees working from
their home did not constitute places of business for the company for purposes
of allowing a patent-infringement lawsuit to be brought.
What we find in these cases is that registering to do business and designating
an agent for service in a state is not sufficient grounds for suit to be filed
against the company in that state. In the Illinois case, the defendant had also
designated the homes of these workers as workplaces for purposes of workers’
compensation, but the judge found that doing so did not establish the employees’
homes as places of business for the defendant.
In discussing when such a home office might subject a company to suit in
the state when an employee works out of their home, the courts cited several
actions that might have changed the outcome. For instance, if an employer listed
an employee’s home as a place of business on its website or otherwise included
the employee’s home telephone number in their online directory, the court’s
conclusion might have been different. The Illinois judge also noted that if the
employer placed any type of signage on the employee’s home, that might factor
into finding that the employer had established a place of business in the
state. The Texas judge added that the court’s decision might have been affected
had the location of where the employees worked been of consequence to the employer,
such as territories assigned or otherwise.
There are many complications related to having employees work out of
their homes. The good news is that in these cases, employers receive some
guidance on what those home offices may mean to the employer in terms of defending
lawsuits in states where it otherwise has had no other operations. Carefully
managing these circumstances can avoid many legal complications.